Nikkei tiptoes up; BOJ easing expectations sustain gains

By Sophie Knight TOKYO, Oct 26 (Reuters) - Japan's Nikkei share averageinched up to trade at four-week highs on Friday, as growingexpectations for significant easing from the Bank of Japan andsoftness in the yen offset profit warnings from Canon Inc and other domestic firms. The Nikkei added 0.1 percent to 9,059.94 , breakingabove its 200-day average of 9,059.18. Sources said the Bank of Japan is expected to ease monetarypolicy next week by expanding asset purchases by at least 10trillion yen and may make a commitment to continue injectingcash until 1 percent inflation is achieved. "The yen has gained a solid foothold above 80 versus thedollar, so we'll continue to see the positive effects of aweaker yen," said Kenichi Hirano, operating officer at TachibanaSecurities. "Expectations for the BOJ to ease are running very high -it's markedly different to previous months." Canon lost 1.6 percent after cutting its full-year profitoutlook by almost 10 percent and posting a weaker-than-expectedquarterly profit. Its sales were hit by anti-Japan sentiment inChina after a territorial row and slowing demand in Europe.

"The market is confused about how to react to the earningscuts and to what extent they're priced in," said Yuuki Sakurai,CEO of Fukoku Capital Management. "People don't know how to weigh up the consequences of thediplomatic problems with China." Earnings from Japanese firms have hardly been stellar - 13out of the 19 Nikkei companies reporting so far have undershotexpectations, but some companies have seen their shares gain onrelief that their results were not worse than expected. Advantest Corp shot 5.3 percent higher after itsdownward revision in guidance for this financial year fellwithin market expectations, with traders noting the chip testermaker was still expecting a profit. But index heavyweight Fanuc Ltd lost 1.8 percentafter the industrial robot maker said its operating profit hadfallen 12.6 percent in the first half and forecast a 7.6 percentdrop in that figure for the full year. Elsewhere, Aeon Co Ltd gained 1.3 percent after theNikkei business daily said the supermarket operator will buy outCarrefour SA's Malaysian subsidiary for just over 20 billion yen($250 million). The broader Topix was flat at 751.51.